It's time for the Great Taper. For the first time since the summer of 2011, the Federal Reserve may ease off the economic gas pedal in the week ahead. For months, investors and traders have been trying to divine when the central bank will reduce its extraordinary efforts to fuel a faster economic rebound.
Bankers aren't ones to appreciate the coincidence of timing, but it was five years ago Wednesday when then-Treasury Secretary Hank Paulson and still-current Federal Reserve Chairman Ben Bernanke went to Capitol Hill to twist arms and get congressional support for what became the Troubled Asset Relief Program. The bailout of banks has been appropriately criticized for its sloppiness, especially for allowing bank executives to make off with millions in compensation. But the effort has recovered 96 cents on the dollar as of August, according to
the Treasury Department. And it's actually made a profit on the money it pushed into the banks.
It may be years before we know if the Federal Reserve's bond-buying habit will share the same fate. For a year, the Fed has been scooping up government and mortgage-backed bonds in its effort to hold down long-term interest rates. Up until June, it had been arguably successful.
It's clear in the language of Federal Reserve governors and regional bank presidents that the Fed wants out -- eventually. Five years ago, the Fed threw out its philosophy of using a light hand to guide the economy. When an economic crash threatened that fall, the bank grabbed the wheel and stomped on the gas, and it hasn't let go since.
Tom Hudson, financial journalist, hosts "The Sunshine Economy" on WLRN-FM in Miami. He is the former co-anchor and managing editor of "Nightly Business Report" on public television.